Page 273 - F2 - MA Integrated Workbook STUDENT 2018-19

Statistical techniques

5.3 Moving averages

Moving averages is a set of calculations used to smooth out the
variations in a time series to identify a trend

Actual sales volume

Trend line

Step 1

Choose the correct cycle length. For instance, if there are seasonal variations
present in a time series and the pattern is repeated every third period (quarterly),
the moving average should be calculated based on three periods at a time to get
the best results. It is possible to calculate a moving average based on any length
of cycle.

Step 2

Calculate the total for the first cycle.

Step 3

Calculate the average by dividing the total by the number of periods in the cycle.

Step 4

Repeat the process for the next cycle, moving on just one period.

Repeat the calculation for each successive cycle until the data has been fully
analysed.

265